HB 132-LOANS UNDER $25,000; PAYDAY LOANS  3:19:13 PM CO-CHAIR HALL announced that the first order of business would be HOUSE BILL NO. 132, "An Act relating to loans in an amount of $25,000 or less; relating to the Nationwide Multistate Licensing System and Registry; relating to deferred deposit advances; and providing for an effective date." 3:19:30 PM REPRESENTATIVE TED EISCHEID, Alaska State Legislature, He reminded the committee that HB 132 seeks to remove an exemption that allows payday lenders to offer short-term loans with extremely high interest rates, to the detriment of many families in Alaska and to the benefit of "predatory out-of-state lenders". He stated that HB 132 would treat all small loans similarly. 3:21:15 PM CO-CHAIR HALL opened public testimony on HB 132. 3:21:49 PM CATHY BRENNAN, Partner, Hudson Cook Law Firm, She explained that her practice focuses on bank partnership programs. She stated that her comments on the proposed legislation would be focused on section 10 of the bill, which she stated would recharacterize bank service providers as true lenders. She explained that the current [Alaska] Small Loans Act (ASLA) ignored the reality that small banks are not able to provide loans at a fair interest rate. She asserted that the proposed legislation would diminish the current availability of consumer credit in Alaska. 3:24:16 PM PATRICK BREWER, President, Southwest Public Policy Institute, He gave a prepared statement, which he stated as follows: I am a consumer advocate and the president of the Southwest Public Policy Institute. In January 2022, New Mexico adopted a house law similar to HB 132. In New Mexico, the proponents of the measure said not to worry about the impact on access to credit. However, traditional banks and credit unions have not filled the void. I would like to ask you a question; with respect, have any of you tried to apply for a Wells Fargo small-dollar loan, because I have. Let's get real, these small d... don't exist. I personally tested the of the credit by applying for small-dollar loans from major banks and credit unions in New Mexico in the aftermath of the rate cap. Despite applying to institutions like Wells Fargo, Bank of America and 15 credit unions, I was universally rejected by the banks. I received ??? approval from just two credit unions. I spent roughly 20 hours attempting to secure just one emergency a loan, a task which is nearly impossible for most consumers, especially those experiencing financial emergencies. Why is this so difficult? Just looking at Wells Fargo, to obtain a small-dollar loan, you first have to open a checking account, which would require you to have money in the first place for a deposit. And then you have to be a customer in good standing for at least a year with recurring direct deposits, and then they will determine whether or not you are eligible. Credit unions have similar requirements except that they conduct hard credit inquiries when you apply, which lowers your credit score and increases your borrowing cost. My? Credit score personally dropped over 100 points when I was just looking for a small 500 dollar loan. I urge the committee to recognize the shortcomings of HB 132, as seen firsthand in New Mexico. The assurances that banks and credit unions ... In closing, I ask the committee to oppose this legislation and consider these real-world impacts and the need for balanced regulations that ensure accessible credit for all. Thank you. 3:26:28 PM MR. BREWER, in response to questions from Co-Chair Fields and Representative Saddler stated that the Southwest Public Policy Institute was funded by private donors, whom he would not identify, and he suggested that the narrative that big banks and credit unions would fill the gaps created by rate caps. He asserted that banks and credit unions were ill-prepared to handle specialized credit applications. 3:28:17 PM DANIELLE ARLOWE, Senior Vice President, American Financial Services Association, She explained that members of the American Financial Services Association ranged from small creditors to large banks. She emphasized that her association did not represent payday lenders or credit unions. She shared three concerns with the proposed legislation and asserted that HB 132 proposed a "confusing, non-standard" definition of rate. 3:30:47 PM CLAIRE LUBKE, Economic Justice Lead, Alaska Public Interest Research Group (AKPIRG), She stated that her association supported HB 132 and recognized the need to reform payday lending in Alaska. She argued that "payday loans are deathtraps that make financial hardship worse." She stated that payday loans, referred to as deferred deposit advances in Alaska Statute (A.S.), are marketed as one-time emergency loans; however, she emphasized that the average customers in Alaska take out more than five loans a year. She further stated that borrowers often take out consecutive loans to pay off an originating loan. She reported that over half of all payday lending occurs online. She stated that companies with deferred deposit advances are not headquartered in Alaska, and many of them did not have storefronts in the state. She stressed... She reported that, in 2023, AKPIRG partnered with the mutual aid network of Anchorage to pay off payday loans for 25 people living in Anchorage, Eagle River, Juneau, Dillingham, services association Palmer, Wasilla, and Bethel. She reported that participants, when interviewed, responded to exhaust all possible alternatives before considering a payday loan. She referred to ??? council supporting legislation... She concluded her testimony by stating that no loan should have interest of over 100 percent. 3:33:01 PM CO-CHAIR FIELDS, based on prior testimony from the [American] Financial Services Association, asked whether the rate calculation of HB 132 should be changed to align with the Truth in Lending Act (TLA). MS. LUBKE responded that she would follow up with the committee, stating that she does not believe the definition conflicts with TLA. 3:34:02 PM NICO REIJNS, representing self, He explained that he is a reverend at the United Methodist Church in Anchorage and that it is a Christian value to stand with vulnerable neighbors. He asserted that society makes being poor very expensive and difficult, and cited payday loans as an example. He asserted that payday loans have unconscionable fees. He provided a personal anecdote about a neighbor who, despite paying off the principal amount of a loan several times over, was still indebted to the company from which she borrowed. He concluded by urging the committee to vote yes on the proposed legislation. 3:36:07 PM MR. REIJNS, in response to Representative Saddler, replied that he represented the official position of his congregation. He added that the United Methodist Conference has supported similar legislation in the past and offered his belief that there was a letter of support from this organization. 3:36:49 PM SUKI MILLER, Executive Director,, Victims for Justice, She explained that her organization was a non-profit that provides support for Alaska victims of violent crimes since the early 1980s. She stated that they aid with critical needs such as rent, gas, and groceries. She stated that many victims of violent crimes, unaware of the services available to them, will take out payday loans in desperation. She asserted that payday loans trap people in cycles of debt. She asserted that a reduction of allowable interest rates on payday loans would offer critical protection for victims, who often turn to payday loans for emergency support. She concluded by thanking Representative Eischeid for introducing HB 132. 3:38:00 PM ANDREW DUKE, Chief Executive Officer, Online Lenders Allliance, He explained that his organization focuses on "policy surrounding credit access," stating that more options and choices yield better outcomes for consumers. He reported that 1/3 of people in Alaska are considered credit-constrained, Alaska leads the nation in credit card utilization, and Alaska has the highest average credit balances in the United States (U.S.). He referred to the legislation passed in Illinois that was similar to HB 132. He stated that the small-dollar loans offered by large legacy banks would not suffice, given the eligibility requirements for these types of loans. He stated that banks, in working with service providers, are able to extend loans across state lines. He offered his belief that the legislators should instead work towards creating more lending options for consumers. 3:40:15 PM CORT WALKER, Vice President, Product & Risk, Check City, He explained that his company has a license in Alaska for lending operations. He argued that the proposed bill, while packaged as consumer-friendly, was wholesale prohibition on licensed consumer-lending in Alaska. He warned that, upon passage of HB 132, "legitimate and licensed short-term lenders" would no longer offer short-term loans in Alaska. He stated that his company's average loan duration was 17 days and that his company charged no more than 15-dollars per 100-dollars borrowed. 3:42:51 PM REPRESENTATIVE SADDLER asked the testifier to restate the organization he represented and asked him to speak to the 36 percent cap. MR. WALKER answered that a 36 percent rate cap on a small loan would make the loan impossible to administer. 3:44:20 PM NOEL LOWE, Owner, Alaska Fast Cash, He said the language in the proposed legislation might include pawn shops, which could negatively affect his business. He asked the committee to entertain an amendment that would confirm the intent of HB 132. 3:45:22 PM CHRIS GRIMM, Head of State Government Affairs, Innovative Lending Platform Association, He said that the Innovative Lending Platform Association (ILPA) was opposed to the proposed legislation because it exceeded its own legislative intent. He said that Alaska would be the first in the country to adopt such a piece of legislation and discouraged the committee's support of HB 132. 3:47:18 PM CO-CHAIR HALL, after ascertaining that there was no one else who wished to testify, closed public testimony on HB 132. 3:47:41 PM REPRESENTATIVE SADDLER moved to adopt Amendment [1] to HB 132, labeled 34-LS0462\N.3, Gunther, 3/25/25, which read as follows [original punctuation provided]: Page 3, line 19: Delete "$500" Insert "$1,000 [$500]" Page 3, line 20: Delete "$2,000" Insert "$4,000 [$2,000]" CO-CHAIR FIELDS objected for the purpose of discussion. REPRESENTATIVE SADDLER stated that before 1996, the fee for all applicants was $200. He explained that, currently, the proposed legislation utilized the existing fee and said that he thought it was appropriate to raise the fee again as the fee had not been changed for 30 years. 3:48:33 PM REPRESENTATIVE COULOMBE [moved to adopt Conceptual Amendment 1 to Amendment 1, to change "$1,000" to "$10,000". There being no objection, it was so ordered. REPRESENTATIVE SADDLER inquired whether Representative Coulombe had intended to raise the second license fee, as well. REPRESENTATIVE COULOMBE answered yes. She moved to adopt Conceptual Amendment 2 to Amendment 1, as amended, to change "$4,000" to "$8,000". 3:49:40 PM CO-CHAIR FIELDS pointed out that since the first license fee had been changed to $10,000, the second license fee should be increased commensurate with the first. He suggested Representative Coulombe restate Conceptual Amendment 2 to Amendment 1, as amended, to reflect that change. 3:49:53 PM The committee took a brief at-ease at 3:49 p.m. 3:50:29 PM REPRESENTATIVE COULOMBE restated Conceptual Amendment 2 to Amendment 1, as amended, to change the license second license fee to "$40,000". There being no objection, it was so ordered. CO-CHAIR HALL asked the sponsors thoughts on the amended amendment. 3:51:24 PM The committee took a brief at-ease at 3:51 p.m. 3:52:21 PM REPRESENTATIVE EISCHEID stated that his office was neutral to the proposed amendments. 3:52:36 PM CO-CHAIR FIELDS removed his objection to Amendment 1, as amended. There being no further objections, Amendment 1, as amended, was adopted to HB 132. 3:53:12 PM CO-CHAIR FIELDS stated that he would not be offering Amendment 2. 3:53:32 PM REPRESENTATIVE CARRICK referenced testimony stating that Alaskans wouldn't be able to find small dollar loans and asked rhetorically what the purpose of a payday loan was. 3:54:51 PM REPRESENTATIVE EISCHEID said that the proposed legislation had been considered in the previous legislative session. 3:55:13 PM REPRESENTATIVE SADDLER stated he appreciated all of the work that had been done to move HB 132 along. REPRESENTATIVE EISCHEID concurred with Representative Saddler's sentiments. 3:55:38 PM CO-CHAIR FIELDS moved to report HB 132, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 132(L&C) was moved out of the House Labor and Commerce Standing Committee.